Investors' risk appetite remained high yesterday as US Treasury Secretary Bessent said that the current level of USChina tariffs is unsustainable. Trump also seemed confident over an eventual deal with China. The end point for tariff levels remainsunclear, but Bessent said about the deal's term that a "reasonable estimate" would be to have it in place by Q3.
Against this backdrop, the US Treasury curve flattened, with short term yields rising. Eurozone sovereign yields rose acrossthe board, with the curves also flattening and peripheral spreads narrowing. On the macro front, PMI surveys came in belowexpectations, with services surprising to the downside and manufacturing holding up better.
Equity indices rose, with Germany's DAX among the top performers, as European investors priced in Trump's comments onTuesday that he would not try to remove Powell as Fed chairman. In the FX market, the dollar strengthened amid risk onsentiment while, in commodities, oil prices fell on rumours that OPEC+ would consider accelerating production by June.
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